Insurers must act on ‘cyber confusion’

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Cyber|Decider, a cyber insurance comparison engine developed by STORM Guidance in the UK, has warned that a failure to standardise the wording of cyber insurance policies is causing confusion for both brokers and customers and blunting the sector’s growth. Insurers, it warns, need to be pro-active in this area, and Cyber|Decider proposes that industry terms should be standardised as a matter of urgency.

Cyber risk is rightly seen as one of the most concerning areas for insurance and financial services firms, and demand for insurance coverage against cyber-related events is growing. However, because of a lack of standardisation in the wording of terms, Cyber|Decider warns that customers are unsure of what is available. For example, the comparison engine points out that ‘network expenditure’ and ‘data restoration costs’ are very different terms for the same thing, while the term ‘computer’ includes ‘industrial control systems’ in some policies, but not all.

In other insurance lines, underwriters tend to use standard terms in order to avoid confusion and keep things concise and clear. Insurers in the cyber arena, unfortunately, have been reluctant to follow this procedure due to what Cyber|Decider calls a ‘misinformed’ belief that sharing agreed standard policies is both anti-competitive and potentially illegal.

“Clients are missing out on getting the right cover because cyber insurance is an area that causes brokers confusion and insurers have done little to rectify that,” warns Neil Hare-Brown, CEO of Cyber|Decider. “When you combine confusing policy wording with the tech jargon around cybersecurity, you are creating an off-putting combination for many brokers.”

Lawyers, Hare-Brown claims, have scared insurers into believing that the implementation of shared terminology is anti-competitive, despite the fact that this is the accepted norm in other areas of insurance. But, he insists, using confusing and off-putting language is handicapping cyber insurance, erecting major barriers to both brokers and clients, and it is essential that underwriters be made aware of just how big an issue this is.

The upshot, currently, said Hare-Brown, is that many brokers will simply offer a blanket policy, whether or not it is the best one for the needs of the individual customer. This means that fewer policies will be sold, and clients will receive lesser protection.

“It is time to break this barrier,” he concluded. “Cyber|Decider is calling on the insurance market to use forums, including the Cyber Insurance Association, to discuss solutions to this growing problem and open the market up to new customers.”

Cyber|Decider has proposed a set of standard definitions of cyber insurance terminology for use by underwriters, which can be viewed on its website.